“People just like you frequently say to me,
‘You have the best business in the world.’ because
your business grows when mine does…
In creative financing, many investors try to have the current owner of the investment property provide the financing. While this is an excellent opportunity when you can get it; you usually still need a private money partner to make the whole thing work. Since most motivated sellers have limited resources, if a property is behind on several payments, it’s going to take someone’s cash to get the bank to stop a foreclosure action. Most likely, the seller of the property won’t have that cash or they wouldn’t be looking at foreclosure. This is where a private money partner can come in.
Someone like me can lend you the cash you need to reinstate the loan.
In the next article, let’s talk about conventional financing and the 3 huge problems you are bound to face should you persist in the use of this form of funding.
Conventional Financing (Part 3 of 4)
Now in this article let’s compare creative financing with a private money scenario to conventional financing: Forget about it! Let’s keep the example of a foreclosure situation. In order to help someone get the loan re-instated, we need money to do that.
If you go to the banks to get the money, it used to be there were three huge problems to overcome. Now, given the present financial conditions, there are many more. However, for simplicity sake, let’s talk about the most obvious ones in this article.
First, the banks offering conventional financing will expect you to have great credit and be able to qualify for the loan.
Second, they will expect you to bring 20% or more of the purchase price and
even prove that you’ve had the cash in your account for months.
Third, they will eventually stop giving you the money as you have more and more deals.
That means, conventional financing is harder, slower, and puts a cap on yourtotal profits. They don’t see you as a better borrower the more good deals you do-they see you as a worse one and start to say, “No,” every time. And no one, (not even the financial experts) can tell you when the present credit crunch will lift. Private money partners, like me, on the other hand, will give you more money, more profits, and more flexibility as you do more and more deals. And, really, isn’t that the way it should be?
As bad as it is trying to use conventional financing, hard money lenders aren’t that much better. Let’s talk in the next article about hard money lending.
Copyright 2009 Kathy Strahan
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